Ikea does its part to fill the wage gap

Counting the Cost

President Barack Obama would like the national minimum wage to rise to $10.10 an hour. By executive order, he has already raised the minimum wage for federal contractors. House Speaker John Boehner (R-Ohio) has threatened to sue President Obama for his use of executive order, which he says circumvents Congressional authority.

Ikea said it will raise the average minimum wage of its workers to $10.76 an hour, which is an increase of 17 percent. Ikea says its goal is to offer their workers a living wage, regardless of whether their competitors offer it. Half of Ikea employees will get a raise, while those who already earn a living wage will not. The chain now provides other benefits, such as a 401-k match. Ikea has just 38 stores in the United States, which may minimize the impact their wage increase has on its competitors. Still, Ikea has done the right thing and earned a competitive advantage in the areas where they have stores.

The Gap, too, has increased its wage to $9 an hour, which will rise to $10 an hour next year. Seattle has raised its minimum wage to $15, and dozens of municipalities have also increased their minimum wage. When employers and municipalities fail to offer a living wage, they shift a wage burden to the rest of us, because those who earn the minimum wage are subsidized by federal benefits to the poor, which we all pay.

This is also true when states refuse to expand the base for Medicaid for the purposes of the Affordable Care Act (ACA, or Obamacare). In more than 20 states, people have to earn less than $11,000, or $23,000 for a family of four. With Medicaid expansion, people can earn as much as $15,000 to qualify for Medicaid, and as much as $32,000 for a family of four. Without the Medicaid expansion, some states are saying that poverty and poor health are acceptable for some of its citizens.

The moves by Ikea and the Gap put some wage pressure on their competitors. It also makes it clear that these companies understand that raising wages will not significantly affect their profits. These companies also understand that better paid employees are also productive employees. Memo to fast food and big box stores set on paying the minimum wage or little more—pay your workers a living wage.

Ikea gets it, so does the Gap. What’s wrong with the Congress? Whether they are Democrats or Republicans, they have constituents who would benefit from an increase in the minimum wage. Why are they resisting? Might it be because President Obama has pushed for an increase in the minimum wage? If our president pushed for blue skies, it is likely that some obstructionist members of Congress would oppose it.

If the minimum wage kept pace with inflation, it would be $10.90 by now, a bit higher than the amount President Obama has proposed. The same Congress that opposes an increase in the minimum wage gets an automatic increase in their pay. This is the kind of hypocrisy that engenders indifference and contempt for our elected representatives.